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September record-large U.S. hog herd topped expectations

Report bearish for hog futures on Monday

(Keith Weller photo courtesy ARS/USDA)

Reuters — The U.S. hog herd in the June-August quarter grew two per cent versus a year ago to a record high, according to Friday’s U.S. Department of Agriculture report, which surpassed average trade projections.

Affordable feed, solid summer grilling demand and respectable U.S. pork exports encouraged farmers to grow their herds. Several producers ramped up sow numbers in preparation for new hog packing plants coming online by 2018.

Based on Friday’s report, analysts believe domestic pork prices will remain low through 2017.

USDA’s report showed the U.S. hog herd as of September 1 at 102 per cent of the year-ago level, or 70.851 million head. It was the highest for any quarter since the government began tabulating quarterly data in 1988, according to Doane Advisory Services economist Dan Vaught.

Analysts, on average, expected 70 million head, or 101.2 per cent of the year-earlier herd.

The U.S. breeding herd was 101 per cent of the year-ago level, at 6.016 million head, up from 5.986 million last year.

The average trade forecast was 6.015 million or 100.5 per cent of the previous year.

The Sept. 1 supply of market-ready hogs for sale to packers was 103 per cent of a year earlier at 64.835 million head, an increase from 63.2 million last year. Analysts, on average, looked for a 1.3 per cent rise, or 64.001 million.

Some forecasters underestimated the impact of new and renovated plants coming on line within the next two years, said Linn Group analyst John Ginzel.

He said some of the report’s bigger-than-expected results could be traced to USDA’s upward revisions from its previous data published in June.

“What’s surprising is the 120 lbs. and heavier hog weight categories up four per cent, suggesting we’ve got a lot of pork ahead of us through the summer,” said Ginzel.

Dan Vaught said Friday’s report was “what everybody had feared” based on several categories that were at or above expectations.

Producers remained status quo with respect to their breeding herd as long as they could generate productivity through pigs saved per litter, said Vaught.

He pointed out that last quarter’s pigs per litter at 10.58 per head was the most ever of any quarter, beating the September/November record of 10.53 per head.

Analysts viewed Friday’s data as bearish for Chicago Mercantile Exchange lean hog futures on Monday, depending on how much of its was factored into the market’s three-cents/lb. limit-down settlement on Friday.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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